Gen Z’s buy-now, pay-later habit is fuelling unsecured loans. Why RBI is worried

The buy-now, pay-later trend among Gen Z is contributing to a rise in unsecured loans, prompting the Reserve Bank of India (RBI) to express concern. A teenage Mumbai couple recently financed their travel expenses to Busan, South Korea, for a BTS concert through a credit card. Meanwhile, a young couple vacationing in Thailand resorted to rotating money through third-party vendors to create artificial cash flow after overspending on credit cards.

Despite India's household debt surging, regulators are particularly wary of non-housing retail loans, which now make up over half of all household borrowings and have grown at a faster rate than other types of loans. As of March 2026, non-housing retail loans, mainly in the consumption sector, constituted 58.4% of households' total debt, up from 54.9% in March 2025.

Average outstanding debt per borrower reached Rs 4.78 lakh in March 2025, up from Rs 3.41 lakh in March 2018. The most significant increases were seen in gold jewelry loans, which jumped to Rs 4.61 lakh crore in March 2026 from Rs 74,738 crore in March 2022, and other personal loans, which reached Rs 17.32 lakh crore as of March 2026, compared to Rs 9.02 lakh crore in March 2022.

The RBI has flagged household debt accumulation, especially among lower-rated borrowers, as requiring close monitoring.